Hudak et al v. Selene Finance LP
Filing
15
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND 5 : Because diversity jurisdiction exists, the Court DENIES the Hudaks motion to remand. Signed by District Judge Irene M. Keeley on 4/7/15. (jss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
EDWARD P. HUDAK and
LISA M. HUDAK,
Plaintiffs,
v.
//
CIVIL ACTION NO. 1:15CV20
(Judge Keeley)
SELENE FINANCE LP,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING MOTION TO REMAND [DKT. NO. 5]
Pending before the Court is the motion to remand filed by the
plaintiffs, Edward P. Hudak and Lisa M. Hudak (collectively, the
“Hudaks”).
For the reasons that follow, the Court DENIES the
motion.
I.
A.
In May 2008, the Hudaks secured a mortgage loan for the
principal amount of $130,845 with a 6% fixed interest rate through
the single family homeowner mortgage program administered by the
Federal Housing Administration (“FHA”).
They used the proceeds to
purchase a home in Mount Clare, West Virginia, where they continue
to reside.
The deed of trust securing the loan incorporated
regulations promulgated by the Department of Housing and Urban
Development (“HUD”), including a requirement that the mortgage loan
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
servicer consider the borrower for loss mitigation alternatives to
foreclosure prior to foreclosing on the home.
In June 2013, the Hudaks filed a petition for Chapter 7
bankruptcy.
On “Schedule D - Creditors Holding Secured Claims,”
they listed the loan originator as holding the deed of trust with
a claimed amount of $130,000. Although they stated that they would
retain their home, they failed to express any intent to redeem the
property or reaffirm the debt.
Three months later, the bankruptcy
court granted the Hudaks a discharge, which extinguished their
personal obligation on the loan, but left intact the lienholder’s
right to foreclose on the home.1
Apparently the Hudaks continued to make regular payments on
the loan until the following year, when Mr. Hudak suffered an
injury that prevented him from working for an extended period.
When the Hudaks fell behind in their payments, their loan servicer
at the time instructed them to submit financial information and
complete a request for mortgage assistance to be considered for
loss mitigation alternatives to foreclosure.
After reviewing the
documentation, the loan servicer offered the Hudaks a forbearance
agreement, which required them to make four monthly payments of
1
See In re Alvarez, 733 F.3d 136, 138 (4th Cir. 2013) (citing
Johnson v. Home State Bank, 501 U.S. 78, 84 (1991)).
2
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
$1738.03 from July 1, 2014 through October 1, 2014, and to resume
regular payments thereafter.
Under the agreement, the payments
would satisfy the accrued arrearages and bring their loan current.
The Hudaks signed the forbearance agreement on June 5, 2014,
and made the first payment of $1738.03 on July 1, 2014.
Shortly
thereafter, on July 11, 2014, they received notification from the
mortgage loan originator that the servicing rights on their loan
were being transferred to Selene on August 2, 2014.
On July 16,
2014, the prior servicer sent the Hudaks a statement showing an
outstanding principal balance of $119,799.27.
Following
the
transfer
of
the
servicing
rights,
Selene
notified the Hudaks on August 12, 2014, that their loan balance was
several thousand dollars higher than the amount represented on the
statement from the prior servicer.
Significantly, Selene’s letter
failed to acknowledge the forbearance agreement.
Thereafter, on
September 2, 2014, Selene sent the Hudaks a notice of default and
right to cure.
The Hudaks contacted Selene, which advised them that it would
not honor the forbearance agreement with the prior servicer.
As
the complaint alleges: “Selene directed [the Hudaks] to an online
link where they could print out and complete forms to submit for a
new request for loan assistance. However, the forms provided by []
3
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
Selene did not comport with forms used for FHA loss mitigation,
which are required by [the Hudaks’] deed of trust.”
at 6).
(Dkt. No. 1-2
Selene also instructed the Hudaks not to make additional
payments until they were in receipt of a new payment schedule.
The Hudaks filled out the new application, transmitted it to
Selene on September 12, 2014, and, as directed, refrained from
making additional loan payments. Nevertheless, on October 8, 2014,
Selene denied the Hudaks’ request for loan assistance, and required
them to pay the arrearage amount in full or face foreclosure.
In
order to avoid falling further behind, the Hudaks attempted to make
monthly payments in November and December; Selene, however, refused
to accept the money and scheduled a foreclosure sale for January 8,
2015.
It also continued its collection efforts by contacting the
Hudaks directly, even though the Hudaks had notified Selene that
they had retained counsel.
B.
The Hudaks filed this action in the Circuit Court of Harrison
County, West Virginia, on December 30, 2014, causing Selene to
cancel the scheduled foreclosure sale.
Their complaint alleges
breach of the forbearance agreement (“Count I”), breach of the deed
of trust (“Count II”), illegal refusal to credit payments (“Count
III”), unconscionable means of collection (“Count IV”), illegal
4
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
debt collection (“Count V”), and contacts after representation
(“Count VI”).
Selene removed the case to this Court on February 6, 2015,
based on diversity jurisdiction. In its removal papers, it alleged
that, “[w]hile Plaintiffs’ Complaint does not specify an amount of
requested damages, it nonetheless is facially apparent that the
damages claimed
exceed
(Dkt. No. 1 at 3).
the
$75,000
jurisdictional
threshold.”
The Hudaks then filed a motion to remand the
case, contending that Selene “cannot prove by the preponderance of
the
evidence
that
the
amount
jurisdiction threshold amount.”
in
controversy
exceeds
the
(Dkt. No. 6 at 6).
In response to the motion to remand, Selene points out that,
because
the
Hudaks
received
a
bankruptcy
discharge
of
their
obligation on the loan note in September 2013, its “only recourse
for recovering the unpaid loan balance is through foreclosure on
the property.”
(Dkt. No. 7 at 1).
It contends that the object of
the litigation is the deed of trust, which has a total value of
just over $130,000 and an unpaid balance of approximately $119,000.
Alternatively,
forbearance
Selene
agreement,
urges
that
potential
the
combined
statutory
values
damages,
of
the
estimated
attorneys’ fees, and the amount already paid on the loan equal
$78,844.71.
5
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
II.
Congress
has
granted
federal
district
courts
original
jurisdiction in “all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and
costs, and is between . . . citizens of different States.”2
U.S.C. § 1332(a)(1).
28
Moreover,
[i]f removal of a civil action is sought on the basis of
the jurisdiction conferred by section 1332(a), the sum
demanded in good faith in the initial pleading shall be
deemed to be the amount in controversy, except that –(A) the notice of removal may assert the amount in
controversy if the initial pleadings seeks . . .
nonmonetary relief[.]
. . .
(B) [R]emoval of the action is proper on the basis of an
amount in controversy asserted under subparagraph (A) if
the district court finds, by the preponderance of the
evidence, that the amount in controversy exceeds the
amount specified in section 1332(a).
28 U.S.C. § 1446(c)(2).
Finally, Selene, as the party seeking
removal, bears the burden of proof.
See Ellenburg v. Spartan
Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008).
2
There is no dispute concerning complete diversity. The Hudaks are
West Virginia citizens. Selene is a limited partnership, none of whose
members is a West Virginia citizen.
6
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
III.
Count II of the Hudaks’ complaint asserts that the deed of
trust “provides that the loan may not be accelerated or foreclosed
upon
until
HUD
regulations,
including
requirements, have been complied with.”
FHA
loss
mitigation
(Dkt. No. 1-2 at 9).
The
complaint seeks specific performance of this provision by Selene.
Id.
For its part, Selene contends that “the specific performance
requested is in fact a veiled request for injunctive relief.”
(Dkt. No. 7 at 5). This distinction is critical, because the value
of an injunction to prevent foreclosure “is the outstanding balance
of the loan.”
Winnell v. HSBC Mortg. Svcs., Inc., No. 2:11CV561,
2011 WL 5118805, at *2 (N.D.W. Va. Oct. 28, 2011); see also Carter
v. Nat’l City Mortg., Inc., No. 1:14CV70, 2014 WL 2862953, at *3
(N.D.W. Va. June 24, 2014).
The Hudaks are less than clear about how they are entitled to
specific performance under their theory of breach with respect to
Count
II.
Their
complaint
suggests
that
Selene,
in
fact,
considered the Hudaks for loss mitigation alternatives, but simply
instructed them to use the wrong forms when submitting their
request.
Thus, an award of specific performance would not require
Selene to consider new information, but only the same information
included on FHA-approved forms.
7
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
It is undisputed that Selene has not yet foreclosed on the
Hudaks’ home; however, it is likewise undisputed that it has
expressed a clear intent to do so.
It had even scheduled a
foreclosure sale, which it canceled days beforehand, only after
this lawsuit was filed.
Because the Hudaks remain in their home,
and Selene actually has not foreclosed, it is difficult to discern
how Selene could have breached an alleged condition precedent to
foreclosure.
The Hudaks attempt to clear up any confusion in this regard,
arguing:
To be sure, Plaintiffs claim that Defendant breached a
specific provision of the applicable Deed of Trust by
pursuing foreclosure. However, Plaintiffs seek to enjoin
Defendant’s breach solely for the purposes of compelling
Defendant to engage in proper loss mitigation before
accelerating the loan and pursuing foreclosure. In other
words, Defendant’s contractual right to accelerate the
loan and pursue foreclosure is conditioned on its
contractual duty to engage in proper loss mitigation.
Accordingly, the actual object of Plaintiffs’ specific
performance claim is loss mitigation, not, as Defendant
speciously asserts, some permanent injunction of
foreclosure resulting in pecuniary loss to Defendant in
the amount of the mortgage loan.
(Dkt. No. 8 at 3) (emphasis in original).
Although far from explicit, the Hudaks appear to premise Count
II on a theory of anticipatory breach.
That is to say, Selene has
affirmatively expressed its intention to foreclose, which, in the
Hudaks’ view, amounts to a breach of contract given Selene’s
8
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
alleged obligation to consider loss mitigation alternatives prior
to foreclosure.
See Homeland Training Ctr., LLC v. Summit Point
Auto. Research Ctr., 594 F.3d 285, 295 (4th Cir. 2010) (citing
Miller v. Jones, 71 S.E. 248, 249 (W. Va. 1911)) (“A party can
certainly keep a contract alive and sue for anticipatory breach at
the same time since West Virginia law expressly allows specific
performance as a remedy for anticipatory breach.”).
Regardless of the Hudaks’ theory of breach, complications
arise given that an inherent characteristic of specific performance
is its inability to be valued in terms of damages.
See Amtote
Int’l, Inc. v. PNGI Charles Town Gaming, LLC, 998 F. Supp. 674, 679
(N.D.W. Va. 1998) (“Under West Virginia law, plaintiff cannot seek
specific performance if it has an adequate remedy at law.”) (citing
Mann v. Golub, 389 S.E.2d 734 (W. Va. 1989)).
Notwithstanding,
courts have determined that, “[i]n a suit for specific performance,
the amount in controversy is the value of the property involved.”
Humble Oil & Refining Co. v. DeLoache, 297 F. Supp. 647, 649 n.1
(D.S.C. 1969) (citing Ebensberger v. Sinclair Refining Co., 165
F.2d 803, 805 (5th Cir. 1948)); see also, e.g., Neuman v. Levan,
No. 8:08-3418, 2009 WL 1856580, at *2 (D.S.C. June 26, 2009)
(“[W]hen the relief sought is specific performance, the amount-in-
9
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
controversy is determined by looking at the value of the property
in question.”).
Such a rule comports with the more general rule regarding nonmonetary relief: “In actions seeking declaratory or injunctive
relief, it is well established that the amount in controversy is
measured by the value of the object of litigation.”
Hunt v.
Washington State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977).
Such value is ascertained by reference to the greater of either the
worth of the remedy to the plaintiff, or its cost to the defendant.
See JTH Tax, Inc. v. Frashier, 624 F.3d 635, 639 (4th Cir. 2010).
The Hudaks go to great lengths to demonstrate that loss
mitigation review would cost Selene very little, if anything.
(Dkt. No. 8 at 5-7).
Their focus on Selene, however, overlooks the
potential value of loss mitigation review from their perspective.
For the Hudaks, the value is not found in the review process
itself,
but
rather
derives
from
the
potential
that,
as
a
consequence of the review process, they will avoid foreclosure and
the loss of their home.
As they have asserted in their complaint,
“Plaintiffs bring this suit to save their family home.”
(Dkt. No.
1-2 at 2).
Thus,
from
the
Hudaks’
perspective,
the
pecuniary
value
resulting from an award of specific performance would be no less
10
HUDAK, ET AL. v. SELENE FINANCE LP
1:15CV20
MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND
than
the
obligated
value
of
to pay
the
home,
$130,845.
for
which
they
Because that
were
figure
originally
exceeds
the
jurisdictional threshold, the Court FINDS that the amount in
controversy has been satisfied.3
IV.
Therefore,
in
conclusion,
because
diversity
jurisdiction
exists, the Court DENIES the Hudaks’ motion to remand.
It is so ORDERED.
The
Court
directs
the
Clerk
to transmit
copies
of
this
Memorandum Opinion and Order to counsel of record.
DATED: April 7, 2015.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
3
Because the specific performance sought by the Hudaks satisfies
the amount in controversy, the Court need not consider the value of any
other relief.
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?